HHS proposal gives states say on essential benefits

December 16, 2011

The government released a bulletin of proposed policies that give states more flexibility in implementing the Health Insurance Exchanges mandated by health care reform.

The proposal drafted by the Department of Health and Human Services would allow state-to-state variations in the essential health benefits package mandated by reform. This would work like the current state variations in Medicaid programs and the Children's Health Insurance Program.

States could choose one of the following health insurance plans as a benchmark for the essential health benefits package:

One of the three largest small group plans in the state

One of the three largest state employee health plans

One of the three largest federal employee health plan options

The largest HMO plan offered in the state's commercial market

If states do not choose one of these plans as a benchmark, the federal government will choose one for them.

The list of essential health benefits chosen by the individual states would apply to coverage sold within the Health Insurance Exchanges and to coverage sold outside the Exchanges within that state.

“Under the Affordable Care Act, consumers and small businesses can be confident that the insurance plans they choose and purchase will cover a comprehensive and affordable set of health services,” said HHS Secretary Kathleen Sebelius in a release on December 16, 2011. “Our approach will protect consumers and give states the flexibility to design coverage options that meet their unique needs.”

The proposed policies address only the services and items covered by a health plan, not the cost sharing, such as deductibles, copayments, and coinsurance. The government said it will release future bulletins addressing cost-sharing rules that will be used to determine the actuarial value of the plan.

There will be an open comment period on the proposed policies until January 31, 2012. Employers, brokers or individuals who wish to participate can send comments to EssentialHealthBenefits@cms.hhs.gov.

Impact to brokers — Brokers, like most Americans, are struggling to keep up with the changing legislation. They need to know exactly what is required for a plan to meet the requirements for the essential health benefits. They will not be able to determine a plan's affordability, any potential gaps in coverage or other valuable information until the final rules are released. And now, those rules can potentially differ by state. This new development will also make it more complex for brokers who do business in multiple states.

Impact on employers — The proposed policies will make offering health benefits more complex for employers who have employees located in more than one state. The Department of Health and Human Services may have to provide further guidance for employers in this situation so they can better understand their obligations and responsibilities.

Impact to employees/individuals — This may impact the type of coverage that is available to them. Depending on a state's philosophy toward health coverage, the list of essential benefits may be more or less generous than what a single national plan would have required.